ANALYSIS: Nike shrugs off industry woes
Nike CEO Mark Parker
Shareholders of US sportswear group Nike can be rest assured this Christmas that current and future growth is ahead of the field, despite a note of caution from the company's boss.
Nike has announced second quarter revenue growth of 10% to US$4.84bn, while net income during the quarter increased 22% to $457m.
Analyst reaction was mixed, and shares in the company shares fell nearly 6% despite an 11% rise in future orders.
Much of the caution is likely to be a result of a somewhat cagey outlook underpinning yesterday's (21 December) results.
Mark Parker, president and CEO of Nike, told analysts: "Near-term there are some continuing macro-economic challenges. As supply and demand finds a new normal in the recovering economy our industry is going to experience margin pressure and rising input costs.
"While the impact of these cost pressures have been delayed for us these factors have not diminished. We expect to see these external forces play out for the remainder of the fiscal year."
Nike expects cotton and labour increases to have the most significant impact on input costs.
"However, the same competitive advantages that fuel our long-term growth give us the leverage we need to help manage the impact of macro-factors in the coming quarters," Parker adds.
Parker adds: "The flexibility and power of our portfolio continued to build, and that's a crucial advantage for Nike. We can really fine-tune how we use our resources for the greatest return and we're doing just that across the entire business."
Furthermore, the company's future orders are expected to rise globally, with only Japan down slightly and Western Europe flat, with China, Russia and North America particularly strong.
Aside from top-line revenue growth, Parker says Nike's cost reduction initiatives also include "lean manufacturing", "shrinking the number of styles" and "surgical price increases."
Therefore, it seems that despite a challenges in the supply chain, Nike has the scale, mix and overall wherewithal to maintain growth for now.
"Flexibility gives us options and that keeps us targeted, aggressive and opportunistic," Parker adds.
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